Thursday, April 3, 2008

The created sub-prime mortgage crisis

Compare and contrast the candidates positions

Last week John Mc Cain delivered a speech on the sub-prime mortgage lending crisis and the issue of bail outs. The New York Times said, ” Drawing a sharp distinction between himself and the two Democratic presidential candidates, Senator John McCain of Arizona warned Tuesday against vigorous government action to solve the deepening mortgage crisis and the market turmoil it has caused,saying that “it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.”

In contrast, ” Mr. McCain’s comments came a day after Senator Hillary Rodham Clinton of New York called for direct federal intervention to help affected homeowners, including a $30 billion fund for states and communities to assist those at risk of foreclosure. Mrs. Clinton’s Democratic opponent, Senator Barack Obama of Illinois, has similarly called for greater federal involvement,including creation of a $10 billion relief package to prevent foreclosures.”

But his remarks drew a quick, pointed rebuke from Mrs. Clinton, who criticized Mr. McCain’s hands-off, market-oriented approach, saying it would lead to “a downward spiral that would cause tremendous economic pain and loss” for Americans.

“It sounds remarkably like Herbert Hoover, and I don’t think that’s good economic policy,” Mrs.Clinton told reporters in Greensburg, Pa. “The government has a number of tools at its disposal. I think that inaction has contributed to the problems we face today, and I believe further inaction would exacerbate those problems.”

In addition to urging $30 billion in federal aid to states to help homeowners, Mrs. Clinton on Monday also endorsed federal legislation to expand the government’s ability to guarantee restructured mortgages, which she believes would lead more banks and other private entities to buy and resell mortgages.

Mr. Obama’s plan emphasizes making it easier to convert subprime loans to fixed-rate, 30-year loans, while requiring that borrowers have access to better data on loan costs and requiring greater scrutiny of lenders.On Tuesday, he said, “It’s deeply troubling that John McCain is suggesting that the best way to address the housing crisis is to sit back and watch it happen.”

Ok, enough BS

Federal regulations have created the sub-prime mortgage crisis. Two of the senators are playing a game of CYA at all of our expense.

Jerry Bowyer, reports in Meet Barry Obama, Fair Housing Lawyer that ,

“there simply was no such thing as a developed Subprime mortgage industry until the US congress created it by ordering banks to issue loans to people who were not credit worthy. Community activist groups (such as the Public Interest Research Group and Acorn)and civil rights law firms (such as Miner, Barnhill & Galland) had make their living by accusing banks of racism when the banks hesitated to approve loan requests from minority citizens with poor credit scores. Fair Housing laws, championed by American Heros like Martin Luther King, Jr., had long-ago outlawed the practice of ‘redlining’,which is refusing to sell or rent to blacks in certain neighborhoods.But a new generation of activists modified the concept of redlining,applying it not just to race-based home sale covenants, but to any refusal to lend to a minority member, even for sensible financial reasons.

The Community Reinvestment Act (CRA)

The Community Reinvestment Act was created as a result. Initially the act was used, not to get banks to lend to minority households, but to get them to cut checks to ‘community groups’. Left of center activist agencies, which had pushed for the act in the first place, used it as a shakedown tool. So long as the banks kept paying off to the activists, the activists would hold off on sending complaints to the bank regulators’ CRA files.

Eventually, under Clinton, the CRA was renewed and, not surprisingly,made more punitive. Banks were required to make Subprime mortgage loans now too, or else suffer a low CRA rating and be punished accordingly.The Fed played it’s part. The Home Mortgage Disclosure rules created an unfunded mandate for banks to track and publicly disclose the race and gender of it’s mortgage clients. Now the shakedown artists had an easy source of complaints and a club with which to beat the banks into submission. The bankers complied and the Subprime mortgage market was born.

But the bad paper remained principally on the balance sheets of the originating banks for a couple of years. The banks and their shareholders were directly hurt, but not the general public, at least in the beginning, that is until the bank regulators once again intervened and encouraged banks to push the paper out to unsuspecting investors.

First the Fed issued guidance which warned the banks that their capital requirements would be severely raised in response to the Subprime mortgages. In other words, banks were told that to the extent that they issued mortgages to high risk borrowers, to that extent they would not be allowed to put as much of their money into income-producing activities. The banks had already been told by the Fed that they would have to set aside more money for mortgages in general,and now they were being hit again for the Subprime variety.

Second, the Fed issued guidance on how to mix Subprime mortgage paper in with good paper and sell the resulting composite security to the general market. This is how the ‘toxic waste’ of bad debt was pumped out into the world. This is why credit markets are now having trouble clearing. This is why banks are taking massive write-downs of the loans which still exist on their books. This is why foreign investors don’t want to buy US mortgages, or bank stocks, and consequently don’t want to buy the dollars in which they are denominated either. If you add to this a Security and Exchange Commission ruling which compels banks to‘mark to market’, which means they are forced to show large losses in times of market panic, you give a legal mandate for short-term thinking. You create a more serious crisis for the system and a fatal blow to the weaker banks.”

“This crisis has the fingerprints of congress and its bureaucratic enforcers all over it. It also has the fingerprints of a generation of activists and ‘fair housing’ lawyers as well, such as Barry (now known as Barack) Obama. That part of the story is yet to be told. And of course, to be fair, it also has the fingerprints of Maggie Williams, Mrs. Clintons loyal campaign manager and former chief of staff. ” (links not in original article )

A recap of their stated positions :

Mc Cain’s : “it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.”
Clinton’s : direct federal intervention to help affected homeowners, including a $30 billion fund for states and communities to assist those at risk of foreclosure.
Obama’s: “greater federal involvement, including creation of a $10 billion relief package to prevent foreclosures.”

PA Primary

As everyone knows, the next primary is located in my homes state of Pennsylvania. The Presidential Primary of Consequence is the Democratic Primary. So we are being flooded with advertisements. But are all the claims valid? ABC reports the following: “Campaigning in Pennsylvania, Tuesday, Sen. Hillary Clinton, D-N.Y.,continued to argue she has opposed the North American Free Trade Agreement since 1992.

“I did speak out and opposed NAFTA,” Clinton told an AFL-CIO audience in Philadelphia. “I raised a big yellow caution flag. I said,’I'm not sure this is going to work.’”

But if Clinton “spoke out” against NAFTA, she did so quietly and behind closed doors, and made no mention of it in her 2003autobiography “Living History.”

Fact Check: Clinton’s Anti-NAFTA Rhetoric
In fact, Clinton worked to sell NAFTA at a Nov. 10, 1993, meeting with business women detailed in her recently-released White House schedules.

Three attendees of that closed-door briefing told ABC News last month that Clinton’s comments were supportive of the trade deal eventually signed into law by her husband.

Laura E. Jones, executive director of the United States Association of Importers of Textiles and Apparel, who was there, said,”There was no question that everyone who spoke, including the firstly, was for NAFTA. It was a rally on behalf of NAFTA to help it get passed. It’s unquestionable. And there are many people out there who were there, who remember the incident, who work in this industry.”

Julia K. Hughes, senior vice president of the same organization, is likewise incredulous of the Clinton campaign’s claims.

“This is such a non issue to us, because, obviously, it was a pro-NAFTA group and a pro-NAFTA event,” said Hughes. “It was a 100percent pro-NAFTA event. No one suggested any inklings of doubt, since part of the agenda was to promote enthusiasm for passage of NAFTA.”

Did that include then-first lady Clinton?

“Absolutely. She was the highlight of the event. She was absolutely the capper to the event. It was a positive rally. I assure you, if there had even been a hint of waffling from her because we were in the last days before NAFTA passed, and it was a pretty hectic time we would have freaked out.”

“It wasn’t a drop-by it was organized around her participation,” said one attendee. “Her remarks were totally pro-NAFTA and what a good thing it would be for the economy. There was no equivocation for her support for NAFTA at the time. Folks were pleased that she came by. If this is still a question about what was Hillary’s position when she was first lady, she was totally supportive of NAFTA.”

A second attendee recalled, “They were looking for women in international trade who supported NAFTA. Sen. Clinton came by at the end. And, of course, she asked for our support and help in passing NAFTA.”

Claiming Credit for Children’s Health Insurance Bill
In another instance of campaign rhetoric not matching the facts,when Clinton talks about health care reform on the campaign trail, she claims credit for the multibillion-dollar children’s health insurance program S-CHIP as one of her signature accomplishments.

Enacted in 1997, the program has provided $24 billion over 10years to states to cover more than 6 million children whose families cannot afford private insurance, but who earn too much to be eligible for Medicaid.

A Clinton campaign TV ad says she “got health insurance for 6 million kids.”

As first lady, Clinton did help by pushing her husband, former President Bill Clinton, to support the program. However, the bill was written and the charge led by Sens. Ted Kennedy, D-Mass., and Orrin Hatch, R-Utah.

“Where I think she has gone too far is when she drops the qualifier, and she says, ‘I created S-CHIP,’ and in that case, that’s not true,” Bill Adair of said.

Obama’s Oil Slick
However, Clinton isn’t the only Democratic candidate making dubious claims on the campaign trail.

In a new TV ad about gas prices, Sen. Barack Obama, D-Ill., says: “I don’t take money from oil companies.”

While it’s true that Obama doesn’t take donations from the oil companies’ political action committees, he has taken $213,884 from people in the oil and gas industry, much of it raised by two oil company CEOs, according to the nonpartisan Center for Responsive Politics.

“I’m not quite sure why a bunch of individuals, who are executives at oil companies, giving the limit, which may add up to $30,40,50,000,would be less significant and less potentially influential on the candidate than PAC money,” Viveca Novak of said.

Obama avoids credit for answers in a 1996 questionnaire supporting a complete ban on handguns and taking other liberal positions he now says he never held.

The Obama campaign blames the answers on a staffer and says the senator “never saw or approved” the questionnaire.

However, in a copy of that questionnaire obtained by ABC News,Obama took notes on it calling into question the claim he “never saw” it.”

As Pennsylvanians look forward to the first day of trout season, we sure see the dual use for our hip boats this primary season.


juandos said...

First things first, let's remember that the Community Reinvestment Act was foisted off onto the taxpayers in 1977 by the majority party of the day...

Yes, I'm talking about the party of the Seditious & Sleazy, need more be said?

John said...

Yes and played to it's fullest by Barry the wanna be a homie

juandos said...

Well John, if Obama has his way he's going to push his idea of the Community Reinvestment Act world wide on the backs of American taxpayers and American business...

Global Poverty Act (S.2433)

If you think that's bad then consider Obama's own words when it comes to disarming the U.S.: IN 52 SECS WHY BARACK OBAMA CANNOT WIN A GENERAL ELECTION

John said...

Ed Rendell is like on fire to defeat Obama-almost like he knows something. I know he would like to be Hillarys VP, but he is more hyped then I have seen him-though I admit, he is normally a hot air bag selling programs to stay in power.